Top 5 Employment Risks Affecting Your Bottom Line

and How to Manage Them

J. Geoffrey Howard

June 2013

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I. Introduction

This presentation will cover:

A.reducing severance liabilities using employment agreements;

B.managing rising disability claims and costs;

C.avoiding harassment claims;

D.defensive use of contractors;

E.avoiding employment standards pitfalls;

II. Employment Agreements

A. Most employee terminations are “without cause”.

B. When terminating “without cause”, employers owe employees:

1. Employment Standards Act (“ESA”) minimum;

and

2. contractual “reasonable notice” or pay in lieu.

C. Reasonable notice awards are discretionary, unpredictable and onerous.

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II. Employment Agreements

D. Employers can use an employment agreement to:

1. define notice/pay;

2. limit severance liability.

E. Employment agreements can also:

1. avoid misunderstandings;

2. impose post-employment restrictive covenants; and

3. confirm employer ownership of rights.

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III. Managing Rising Disability Claims and Costs

A. Employers are facing a rising tide of disability claims and costs.

B. Human Rights Tribunals are imposing an extraordinary burden to “accommodate” disabled workers.

C. Tips for managing the tsunami:

1. an “incapacity” clause in employment contracts;

2. ensure policies limit how long benefits extend;

3. monitor absenteeism and manage disabilities.

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IV. Avoiding Harassment and Bullying Claims

A. Harassment is still incredibly common in the Canadian workplace.

B. Direct costs and collateral damage to morale of harassment are very high.

C. HRTs continue expand harassment:

1. redefining “consent”;

2. recognizing wide variety of behaviours;

3. broadly defining when harassment is tied to the workplace.

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Typical Scenario

Léo repeatedly propositions his 20 year-old subordinate over six months, Gillian, who finally goes off on sick leave. Her father reports the harassment and after an investigation during which he is suspended, Léo is fired.

Pre-complaint costs

(all figures guesstimates)

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Direct Indirect

• Sick pay to Gillian on days she phones in sick then is off recovering

$5k • Gillian’s lower productivity and absences to avoid Léo

• Other female employees demoralized

Costs

A.Complaint Costs

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Direct Indirect

• Investigators’ Fees

• Company lawyer fees to advise on complaint

$15k

$10k

• Productivity drops as co-workers focus on investigation

• Léo’s region results decline due to his being distracted then absent during suspension

$10-50k

Costs

A. Settlement and “Fallout” Costs

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Direct Indirect

• Gillian is paid • Compensation for

harassment• If she sues for

severance add• Legal fees for

defending claim add• If Léo sues after being

fired, legal fees to defend

• Cost to hire and train up Gillian’s and/or Léo’s replacement

$25k

$10-50k

$20k

$20k

$10-20k

• Other employees may be upset and leave

• Customers and suppliers learn of situation and may reduce business

• Company’s reputation damaged

??

Could be$100k plus

TOTALS(using guesstimates)

$115k to$165k

$150k plus

IV. Avoiding Harassment and Bullying Claims

D. Employers can be liable if:

1. the harasser was a manager; or

2. inadequate steps taken to stop harassment.

E. New WorkSafeBC changes:

1. expand WCB benefit coverage to harassment and bullying;

2. create an obligation on employers assess, consider preventative steps and address complaints;

3. not limited to protected grounds under HRC.

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IV. Avoiding Harassment and Bullying Claims

F. To reduce that liability:

1. update harassment policy;

2. provide training;

3. take complaints seriously;

4. conduct investigation.

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V. Defensive Use of Contractors

A. Canadian employers are hiring more workers as contractors.

B. Agencies and tribunals have power to retroactively reassess contractors: CRA, ESB, WCB.

C. Reassessments can add dramatically to contractor cost.

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V. Defensive Use of Contractors

D. Courts and tribunals look at the following factors to determine contractor status:

1. control;

2. compensation;

3. “tools”;

4. how “integral”?

5. “carrying on business”;

6. avoid “red flags”.

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V. Defensive Use of Contractors

E. To manage this risk:

1. evaluate relationships and consider converting to employee status;

2. consider changing terms of contracting to be more compliant;

3. always use a written contract with contractors:

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VI. Avoiding Employment Standards Pitfalls

A. Risk: Retroactive assessment of OT premiums for one or a group of employees

B. Overtime: Unless employee fits into a defined exempt class, they are entitled to overtime.

C. Solutions are few but may include:

1. structuring pay to include regular overtime at premium rates;

2. averaging agreements or time off in lieu;

3. ensuring managers meet the test.

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VI. Avoiding Employment Standards Pitfalls

C. Risk: retroactive assessment for vacation pay on bonuses, commissions, OT pay etc.

D. Vacation pay is due on all “wages” including commissions, bonuses and other forms of incentive pay.

E. To address this liability:

1. pay the additional applicable vacation pay %;

2. redefine commission and bonus plans to pay separately the vacation pay.

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VI. Avoiding Employment Standards Pitfalls

E. New Family Day Statutory Holiday: Unless employers adapt their policies, starting in 2013, employees get the new Family Day statutory holiday. 1. imposes a 4.2% reduction in working days;2. employees working must receive 1.5 times regular pay

plus stat holiday pay;

3. adding another stat may create inequities;

4. employers can consider options:a) eliminate day off and/or pay on Boxing Day or Easter

Monday;b) agree with employees to substitute Boxing Day as stat in

lieu of legal stat such as Remembrance Day.

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Thank You

montréal ottawa toronto hamilton waterloo region calgary vancouver beijing moscow london

J. Geoffrey HowardTel: 604-891-2279Email: geoffrey.howard@gowlings.com

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